Closing Recap

Monday, May 06, 2024

U.S. stocks marched higher for a 3^rd straight day on Monday (spiking in final minutes to close at the highs), buoyed by Communications, Energy, Industrials, Financials, and Technology shares bouncing after a rough April. A recent bout of higher inflation readings weighed on sentiment last month, but investors look to have shaken their fears amid a strong start for stock markets in May. Federal Reserve Bank of New York President John Williams said that “eventually” the central bank will cut interest rates; not offering a specific timetable for monetary policy easing in comments made before the Milken Institute 2024 Global Conference noting the Fed’s efforts to shrink the size of its balance sheet have gone well and haven’t rattled markets. Treasury yields edged modestly lower, but the 10-yr held up around 4.5%, while the dollar index (DXY) was flat around 105. Gold prices resumed their upward momentum after a brief pullback off recent all-time highs. The Smallcaps Russell 2000 advanced for the 6^th time in seven days while the Nasdaq rose as high as 16,312 on day, a nearly 900-point bounce off the 4/25 low of 15,375 – just 8-trading days ago. S&P futures (Spuz) hit new highs this afternoon above 5,200 (first time above 5,200 since 4/15) – and well off the April low of 4,963.50 on 4/19 as markets continue to squeeze as inflation fears subside (ahead of CPI, PPI data next week) as investors use the April dip to buy. A quiet day on macro front with no major US economic data (or for the week upcoming) and heavy dose of earnings begins tomorrow. A big day for technicals as the Russell 2000, S&P 500, and Nasdaq 100 all moves well above their respective 50 day moving averages with today’s rally.

• Gold prices rebounded $22.60 to settle at $2,331.20 an ounce as markets continue to expect the next move by the Fed to be lower interest rates, though the timing and number of cuts expected this year has been reduced drastically since the beginning of the year (current view for around 2 cuts vs. 5-6 cut view when 2024 began).
• Treasury yields were quiet on day, small slippage with no major economic data points of note today. There’s $125B of notes and bonds on auction this week by the US Treasury including $58B of 3-year notes on Tuesday 5/7, $42B of 10-year notes on Wednesday 5/8, and $25B of 30-year bonds on Thursday 5/9

• In Retail: VSCO was downgraded to Underweight and $15 tgt at Morgan Stanley as anticipate sales & GM-driven Q124 EPS downside (-9c vs consensus -1c); DECK earnings later this month and Wedbush said they are most encouraged by data they’ve seen suggesting exceptionally strong DTC growth for both the UGG and Hoka brands in recent weeks; PLCE Q4 adj. operating loss was -$30.9M, worse than the est. loss of -$5.07M while Q1 sales slipped to $455 million from $456.1 million last year. In earnings tonight, results expected from BYON, COTY, BRBR.

• In Leisure and Lodging: BOWL shares fell as earnings missed as company guides to low end of fiscal year range; in lodging, SHO reported a top and bottom line beat for Q1 as Comparable RevPAR decreased 5.1% to $223.06. In ride hailing, UBER shares strong initially ahead of shareholder meeting this morning and positive comments at Morgan Stanley saying its growth-adjusted multiple is now lower than LYFT/CART, creating an attractive entry point. In autos, Reuters reported NIO is on track to unveil a new model under a mass-market brand by the end of this month and a second smaller EV to be sold in Europe next year for less than $30,000.

• In Utilities: ALE enters agreement to be acquired by a partnership led by Canada Pension Plan Investment Board and Global Infrastructure Partners as shareholders to receive $67.00 per share in cash in deal valued at $6.2B.
• In Metals & Mining: US Steel (X) shares rose after the European Commission approved U.S. Steel’s $14.9 billion buyout by Nippon Steel as the commission concludes that the transaction will not raise competition concerns, given the companies’ limited market positions resulting from the proposed transaction. Gold miners (NEM, AEM, GOLD) are back on the rise with the price of gold rebounding after profit taking last week from all-time highs in April. NUE shares fell as the steel producer lowered spot price for its hot-rolled coil (HRC) to $760 per short ton from $825/ton.
• In Aerospace & Defense: BA shares were cruising higher, on track to finish up for 7 of last 8 to highest levels since April 9th ($183.98 High on day) topping its 50dma of $183.50 (hasn’t been above 50dma since January) – but shares rolled to lows around $175 late afternoon after the WSJ reported Federal air-safety regulators have opened a new investigation into Boeing related to the company’s inspections of its 787 Dreamliner and whether company employees falsified records.

• In Crypto/Bitcoin: Prices jumped over the weekend/this morning with Bitcoin topping $65,500 highs after falling below $57K last week around the Fed meeting; prices pared gains to around $63,100 this morning; MARA to replace AAON in S&P 600 on 5/8 and Aaon to replace VST in S&P 400 at open on 5/8 (which is being added to S&P 500 index replacing PXD).
• In REITs: CPT was upgraded from Underweight to Neutral at Piper and raised tgt to $110 from $90 in multi-family REITs saying jobs in the Sunbelt are proving stronger than expected and thus managing the record supply better than originally believed heading into this year. Piper is also reiterating its OW on ESS, as it believes they, along with OW-rated AVB, are best positioned for further upside this year. MAA was upgraded to Outperform from Neutral at Wedbush and raised tgt to $154 from $135 in multifamily REITs following its initial take last week that pointed to its expectation of continued momentum through the supply headwinds in the Sunbelt. MPW shares fell as Steward Health files for Chapter 11 bankruptcy, to get $75M from Medical Properties Trust (MPW) https://tinyurl.com/hvy6fyru

• BCRX reported Q1 revs $92.8M above ests. $85.6M amid strong sales for its hereditary angioedema treatment, Orladeyo.
• BNTX posted Q1 loss of EUR1.31 a share, down from earnings of EUR2.05 recorded in the year ago quarter as total revenue of EUR187.6 million dropped from EUR1.277 billion the year prior as sales of its Covid-19 vaccine fell; reiterated guidance.
• EYPT shares fell after saying topline results from a Phase 2 clinical trial evaluating Duravyu in non-proliferative diabetic retinopathy didn’t meet the pre-specified primary endpoint.
• GLYC shares tumbled after saying its drug to treat a form of acute myeloid leukemia didn’t meet its primary endpoint.
• GOSS said it will collaborate with Italian drugmaker Chiesi Group to develop and commercialize its therapy seralutinib in multiple indications related to high blood pressure due to constriction of lung arteries.
• GRFS said it has completed all domestic, overseas government approval procedures for selling 20% stake in Shanghai RAAS to Haier; says it expects the deal to be finalized by June.
• IART shares fell as Q2 and FY24 EPS come in below consensus; lowers FY24 adj EPS view to $3.01-$3.11 from $3.15-$3.25 and saw Q2 EPS $60-$0.65 vs. est. $0.75 (posted Q1 rev beat and higher rev guide).
• KRYS reported Q1 revs $45.2M that missed the $47.4M estimate; continues to anticipate $150M to $175M of R&D and SG&A expenses for the year.
• LYRA shares tumbled after saying lead experimental therapy, LYR-210, did not meet the main goal of a late-stage trial testing it for the treatment of chronic rhinosinusitis, a long-lasting sinus inflammation.
• NVAX shareholder hedge fund Shah Capital says it is urging shareholders to vote against the election of three directors on the board of NVAX; Shah Capital intends to vote against the election of the board members.

• In Online dating apps: Keybanc lowered price tgts on MTCH to $46 from $50 and BMBL to $16 from $18 in dating apps into earnings saying they saw some signs of stabilization in customer trends at Tinder in Q1 in its Key First Look credit and debit card data, although it acknowledges declines remain large y/y. In its view, the key for Q1 earnings reports is for both Match and Bumble to provide more concrete details on why trends should improve without impairing margins.
• In IT & Services: PRFT shares jumped after entering into a definitive agreement to be acquired by an affiliate of BPEA Private Equity Fund VIII, part of EQT AB, in an all-cash transaction valued at approximately $3.0B. Under the terms of the agreement, Perficient stockholders will receive $76.00 per share in cash for each share of common stock.
• In Media: DIS shares rise to 3-week highs ahead of earnings tomorrow morning. Separately, Reuters reported DIS and CMCSA are in talks to hire a financial adviser to resolve a dispute over how to value the 33% stake in Hulu that Disney will acquire from Comcast.
• In Semiconductors: semiconductors resume upward momentum after weak April, as shares on NVDA top $900 for the first time since April 15^th amid broad strength in semis (ahead of another busy week of earnings); SIMO upgraded from Equal Weight to Overweight at Morgan Stanley and raise tgt to $88 from $59 saying ample business tailwinds excite US, including larger backlog and margin expansion, along with potentially more business upside from the AI era. MU shares outperformed in memory along with STX, WDC after positive analyst commentary in DRAM/Memory pricing.
• Big earnings night in optical sector with COHR, LITE, FN results expected; in semis, MCHP will be a key focus and in software, investors will key in on PLTR and VRNS for further looks at security which has been mixed to cautious.